SEC Filings

<PAGE> 4
a judgment or other final adjudication establishing: (a) any breach of the
director's duty of loyalty; (b) acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; or (c) any
unlawful distributions. Nor does this provision eliminate the duty of care and,
in appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Tennessee law. Finally,
this provision does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
The Registrant has entered into indemnification agreements with all of
its directors and executive officers providing that it will indemnify those
persons to the fullest extent permitted by law against claims arising out of
their actions as officers or directors of the Registrant and will advance
expenses of defending claims against them. The Registrant believes that
indemnification under these agreements covers at least negligence and gross
negligence by the directors and officers, and requires the Registrant to advance
litigation expenses in the case of actions, including stockholder derivative
actions, against an undertaking by the officer or director to repay any advances
if it is ultimately determined that the officer or director is not entitled to
indemnification.
The Registrant believes that its Charter and Bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
At present, there is no litigation or proceeding involving a director
or officer of Registrant as to which indemnification is being sought, nor is the
Registrant aware of any threatened litigation that may result in claims for
indemnification by any officer or director.
Pursuant to Management and Human Resources Agreement between the
Registrant and American Healthcorp, Inc. ("AHC") (the "Management
Agreement"), the Registrant will indemnify and hold AHC, its directors,
officers, employees and agents and any person who controls AHC within the
meaning of the Securities Act of 1933, as amended (the "Securities Act") in the
absence of gross negligence, harmless from and against any and all liabilities,
claims or damages (including the cost of investigating any claim and reasonable
attorneys' fees and disbursements) in connection with any services performed by
AHC pursuant to the Management Agreement or any transactions or conduct in
connection therewith.
The Registrant has purchased an executive liability insurance policy
which will provide coverage for its directors and officers. Under this policy,
the insurer will agree to pay, subject to certain exclusions (including
violations of securities laws), for any claim made against a director or officer
of the Registrant for a wrongful act by such director or officer, but only if
and to the extent such director or officer becomes legally obligated to pay such
claim or the Registrant is required to indemnify the director or officer for
such claim.
II-3